Executive Summary
The conduct of monetary policy by the Reserve Bank continues to be guided by the twin objectives of maintaining an adequate level of foreign reserves and keeping inflation low. The policies implemented to date have, to some degree, had the desired effect of curbing excessive credit growth, slowing imports and relieving pressures on Fiji’s foreign exchange holdings. As a result, the monetary policy objectives have continued to remain intact. At the end of November, inflation was 4.0 percent while the foreign reserves label of $919.9 million was sufficient to cover 4.1 months of imports of goods.
The Fiji economy is now expected to contract by 3.9 percent this year and recover to growth of 2.2 percent in 2008. The outturn for 2007 is largely influenced by a contraction in most of Fiji’s major sectors, while the recovery next year is anticipated to be driven mainly by the agriculture, forestry, fishing and subsistence; manufacturing transport & communication; wholesale & retail trade, hotels & restaurants; electricity & water and building & construction sectors.
The current account is projected to remain in a deficit this year underpinned mainly by a large trade deficit. Cumulative to September this year, the trade account registered a deficit of around $1.2 billion, an improvement of 18.9 percent when compared with the same period last year. The outcome was mainly due to a slowdown in import growth and a slight upturn on the exports front. Despite the present declaration in imports, the trade imbalance is still substantial, as exports continue to perform well below their potential.